Is it a good company at a reasonable price? The price is reasonable but at the top end of the reasonableness range. I have no plans of selling this REIT. The feature I do not like is that it cannot grow its dividends.
I own this stock of Choice Properties REIT (TSX-CHP.UN, OTC-PPRQF). I got this stock when CDN REIT was acquired by Choice Properties. Choice was originally a spin off from Loblaws. Later George Weston Limited (TSX-WN) in a reorganization received Loblaw’s share of Choice (61.6% interest) and Loblaws minority shareholders got George Weston Limited shares. The Weston Family owns a majority share in George Weston Ltd and George Weston Limited has a controlling interest in Loblaws.
When I was updating my spreadsheet, I noticed that I have done well with the stock. I got shares because Choice bought out Canadian REIT which I had held. I have made a total return since buying Canadian REIT of 10.64% per year with 5.87% from capital gains and 4.77% from dividends. Since having Choice Properties REIT, I have a total return of 11.43% with 5.43% from capital gains and 5.48% from dividends.
If you had invested in this company in December 2013, $1,009.92 you would have bought 96 shares at $10.52 per share. In December 2021, after 8 years you would have received $544.56 in dividends. The stock would be worth $1,458.24. Your total return would have been $2,002.80.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $10.52 | $1,009.92 | 96 | 8 | $544.56 | $1,458.24 | $2,002.80 |
The dividend yields are good with dividend growth currently flat. The current dividend yield is good (5% to 6% ranges) at 5.15%. The 5 and 8 year median dividend yields are also good with both at 5.66%. The dividend growth over the past 5 years is low at 1.56% per year. However, dividend increases were stopped in 2019 and there is no indication that they intend to increase them in the short term.
The Dividend Payout Ratios (DPR) are fine since for REITs the important DPRs are for FFO and AFFO. The DPR for EPS for 2021is 2325% with 5 year coverage at 192%. Because this is a REIT, we need to look at the DPR for Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). The DPR for FFO for 2021 is 78% with 5 year coverage at 74%. The DPR for AFFO for 2021 is 91% with 5 year coverage at 88%. The DPR for Free Cash Flow for 2021 is 92% with 5 year coverage at 79%. However, the various sites that I looked at all disagreed and disagreed a lot on the FCF.
Debt Ratios could improve. The Long Term Debt/Market Cap Ratio for 2021 is good at 0.57. The Liquidity Ratio for 2021 is good at 2.13. The Debt Ratio is 1.26. This is low and I would prefer it to be 1.50 or higher. The Leverage and Debt/Equity Ratios are 4.89 and 3.89 respectively. These are high and I would prefer them to be below 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 8 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 1.56% | 7.66% | 2.43% | 5.23% |
| 2013 | 8 | 1.63% | 10.48% | 4.70% | 5.78% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.12, 13.85 and 14.58. The corresponding 8 year and historical ratios are 13.12, 13.85 and 14.58. The current P/E Ratio is 451.95 based on a stock price of $14.38 and EPS for last 12 months of $0.03. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Because this is a REIT, we need to look at Price/Adjusted Funds from Operations Ratios. The 5 year low, median, and high median P/AFFO Ratios 13.54, 15.46 and 17.28. The corresponding 8 year ratios are 13.79, 15.46 and 17.28. The current P/AFFO Ratio is 16.53 based on AFFO for 2022 of $0.87 and a stock price of $14.38. The current ratio is between the median and high of the 8 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Because this is a REIT, we need to look at Price/ Funds from Operations Ratios. The 5 year low, median, and high median P/FFO Ratios 11.56, 13.24 and 14.93. The corresponding 8 year ratios are 11.54, 12.94 and 14.65. The current P/FFO Ratio is 14.67 based on FFO for 2022 of $0.98 and a stock price of $14.38. The current ratio is above the high of the 8 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $13.56. The 8 year low, median, and high median Price/Graham Price Ratios are 0.79, 0.88 and 0.99. The current P/GP Ratio is 1.06 based on a stock price of $14.38. The current ratio is above the 8 year median high ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an 8 year median Price/Book Value per Share Ratio of 1.31. The current ratio is 1.72 based on a Book Value of $3,302M, Book Value per Share of $8.34 and a stock price of $14.38. The current ratio is 31% above the 8 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an 8 year median Price/Cash Flow per Share Ratio of 4.56. The current P/CF Ratio is 8.50 based on Cash Flow for last 12 months of $669.4M, Cash Flow per Share of $1.69 and a stock price of $14.38. The current ratio is 87% above the 8 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an 8 year and historical median dividend yield of 5.66%. The current dividend yield is 5.15% based on dividends of $0.74 and a stock price of $14.38. The current dividend yield is 9% below the 8 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 8 year median Price/Sales (Revenue) Ratio is 7.10. The current P/S Ratio is 7.64 based on Revenue estimate for 2022 of $1,362M, Revenue per Share of $1.88 and a stock price of $14.38. The current ratio is 7.6% above the 8 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably still at a reasonable level, but probably at the high end of it. Both the dividend yield test and the P/S Ratio test shows that the stock price is reasonable but above the median. However, a number of other tests is showing the stock price as expensive.
When I look at analysts’ recommendations, I find Strong Buy (1) and Hold (7). The consensus would be a hold. The 12 month stock price is $16.03. This implies a total return of 16.62% with 11.47% from capital gains and 5.15% from dividends based on a stock price of $14.38.
When I looked at analysts’ recommendations last year, I found Buy (1) and Hold (7). The consensus was a hold. The 12 month stock price is $13.81. This implied a total return of 13.94% with 8.34% from capital gains and 5.79% from dividends based on a current price of $12.77. What happened was a total return of 18.40% with 12.61% from capital gains and 5.79% from dividends based on a starting price of $12.77.
TD Securities says that give it a Hold because of its current valuation in relation to its peers. I thought that the stock price last year was reasonable. This year, TD Securities is still given this stock a Hold rating with a 12 month stock price of $16.00.
One analyst on Stock Chase calls this stock a good income play. Kay Ng Motley Fool thinks this stock is a great way to become a passive landlord. Christopher Liew on Motley Fool says that this stock is a pure dividend play. The company reports on the 2021 year end in a Press Release. A report from Simply Wall Street on Yahoo Finance talks about insider trading. Simply Wall Street lists 4 risks of (1) Interest payments are not well covered by earnings, (2) Unstable dividend track record (3) Large one-off items impacting financial results and (4) Profit margins (1.7%) are lower than last year (34.1%). They seem wrong about unstable dividend track record. This site often confuses dividends paid in Canadian Dollars with fluctuating dividends, but only the exchange rate is fluctuating.
Choice Properties Real Estate Investment Trust invests in, manages, and develops retail and commercial properties across Canada. The company's portfolio primarily consists of shopping centers anchored by supermarkets and stand-alone supermarkets. The properties are mostly located in Ontario and Quebec, followed by Alberta, Nova Scotia, British Columbia, and New Brunswick. Its web site is here Choice Properties REIT.
The last stock I wrote about was about was Manulife Financial Corp (TSX-MFC, NYSE-MFC) ... learn more. The next stock I will write about will be ARC Resources Ltd (TSX-ARX, OTC-AETUF) ... learn more on Friday, February 25, 2022 around 5 pm. Tomorrow on my other blog I will write about My Portfolio.... learn more on Thursday, February 24, 2022 around 5 pm.
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